A project in France yields a series of Euro cash flows as the following: -600 200 500 300 0 1 2 3 The exchange rate...

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A project in France yields a series of Euro cash flows as thefollowing:
-600 200 500 300
0 1 2 3
The exchange rate of Euro today is $1.25 per Euro. The inflationrate in the euro zone is ?€ = 3%, the inflation rate in dollars isp$ = 6%. The cost of capital in USD is 10%. Assume thatinternational fisher effect and purchasing power parity holds.
1. Please solve for the project IRR in Euros
2. Solve for the equivalent USD IRR.
3. Please solve for the project NPV in USD
4. Please solve for the project NPV in Euro

Answer & Explanation Solved by verified expert

3.8 Ratings (611 Votes)

Ans 1 At IRR NPV0NPV Initial investment CF11RN CF21RNR discounting rateThis is what we need to findN YearWe can find IRR by trial and error See Answer

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A project in France yields a series of Euro cash flows as thefollowing:-6002005003000123The exchange rate of Euro today is $1.25 per Euro. The inflationrate in the euro zone is ?€ = 3%, the inflation rate in dollars isp$ = 6%. The cost of capital in USD is 10%. Assume thatinternational fisher effect and purchasing power parity holds.1. Please solve for the project IRR in Euros2. Solve for the equivalent USD IRR.3. Please solve for the project NPV in USD4. Please solve for the project NPV in Euro